Local Government Finance Bill

Nick Raynsford Excerpts

Tuesday 10th January 2012 Commons Chamber

[Mr Pickles]

Yes, of course. The idea is to give the maximum incentive to councils. That is how the system is being devised. However, it is much simpler than the existing system, which is just about impenetrable. Indeed, London Councils considered that point some time ago when it described the four—[Interruption.] Ah, I have it in front of me. How very helpful! This is marvellous. Bob always comes up trumps. This quote comes from the London Councils’ report, “Four Block Muddle”:

“The current formula grant system…lacks transparency and is inherently unstable and unpredictable, generating fluctuations in grant allocation that defy logic… Even finance experts, let alone members of the public, struggle to understand the working of this complex system.”

So here we are introducing a much better system, and, to coin a phrase, I would have expected local councils to rejoice, rejoice, rejoice.

[Mr Nick Raynsford (Greenwich and Woolwich) (Lab)]

rose—

[Mr Pickles]

I give way to the right hon. Gentleman, the architect of our present system.

[Mr Raynsford]

I am grateful to the Secretary of State but I have to say that many other people besides me were architects of the existing system. However, given that doubts are being expressed by many local authorities about whether the provisions in the Bill will achieve the objectives that the Secretary of State has set out, will he, in words of one syllable and in plain English, explain the provisions in the first seven clauses of the Bill, which to most people are absolutely incomprehensible gobbledegook?

[Mr Pickles]

I feel a little stung because I have always been most helpful to the right hon. Gentleman.

Clause 1 deals with the local retention of the non-business rate and provides for the framework of the rate retention scheme in England by inserting a new schedule 7B into the Local Government Finance Act 1988. Clause 2, on the revenue support grant, gives effect to schedule 2, dealing with the amendment of provisions about revenue support grant in England. Clause 3, on additional grant, amends the 1988 Act to remove the provision for the Secretary of State to pay additional grant to local authorities in England. It also makes consequential amendments to the Local Government Finance Act 1992 and the Greater London Authority Act 1999. Clause 4, on the local government grant, amends section 100 of the 1999 Act so that from 1 April 2013 the Secretary of State may pay a general grant to the Greater London authority for a financial year but will not be required to do so. I think that that covers the point, although we could go through the entire Bill—there are only 16 clauses.

--- Later in debate ---

[Mr Nick Raynsford (Greenwich and Woolwich) (Lab)]

First, may I draw attention to my interest, as declared in the register?

The Bill speaks volumes about the Government responsible for introducing it. First, it is largely incomprehensible, and I challenged the Secretary of State, when he was in his place, to explain, in plain English, the meaning of the first seven clauses. Of course he immediately had to rush to get a copy of the explanatory notes, which he read out in a rather tedious way, because it is impossible for the lay reader to understand the clauses. They are phrased entirely in terms of amendments to existing legislation. Interestingly—this is perhaps why he was unwilling to rise to the challenge—the very first piece of legislation referred to, in clause 1, is the Local Government Finance Act 1988. Some people will know what that was—it was the Act that introduced the poll tax. So the people responsible for the poll tax are back with us again, only this time they have the Liberals on board with them.

The Bill is incomprehensible as legislation and it is contradictory in that its effects will be very different from what it claims to do. It talks the language of localism but, as my right hon. Friend the Member for Leeds Central (Hilary Benn) ably pointed out from the Front Bench and as was equally highlighted by my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Select Committee on Communities and Local Government, it is actually a deeply centralising measure that gives huge powers to the Secretary of State to determine what amounts of local revenue can be retained by individual local authorities and, crucially, how much will be clawed back by the Treasury. One of the key provisions, which the Chair of the Select Committee highlighted, is the erosion of grant support from the Government to local authorities. The main source of revenue to local authorities will now be business rates but authorities are not even going to have the benefit of retaining all those rates because of the claw-back provisions in the Bill. The Bill is a deeply flawed, centralising measure that does not do what it says on the tin; it covers itself in the language of localism but is a profoundly centralising measure.

Let us address the part of the Bill that deals with council tax benefit, which is a nasty little piece of legislation and which does not just cut 10% from the benefits of people who depend on this for support with the cost of their council tax. There are large numbers of these people—almost 6 million—and, on average, they are getting about £15 a week, or £800 a year. A very large number of vulnerable people depend on this revenue, some of whom will have all of it taken away and some of whom will have some of it taken away. We do not know what the consequences will be, because the Government have not yet set out the detailed rules. Therefore, local authorities, which are expected to introduce the provision in just a year’s time—they are to have the scheme in place by the end of January 2013—do not know how to begin to plan the scheme because they do not know what the Government’s reserve requirements are.

I must say to the Government that the approach being taken is horrifyingly reminiscent of another disaster of the 1980s: the introduction by the then Conservative Government of housing benefit. The Conservatives like to forget or obscure the fact that it was the Thatcher Government who introduced housing benefit and were responsible for the scheme which Conservatives are now attacking, criticising and saying needs reforming. Its introduction was done in just the same way that the current Government are proposing to introduce these changes: in a rush, without adequate consultation and with a lot of the detail unavailable until very much the last minute. The consequence then was administrative chaos, which was described by some of the country’s most respected newspapers as the

“biggest administrative fiasco in the history of the welfare state.”

I have to say to this Government that they are on track to repeat that experience now. They are rushing ahead with a highly complex scheme without giving local authorities the time to prepare properly, and they are going to do it in a way which imposes steep cuts and therefore affects the living standards of people who depend on this benefit for their welfare. The approach is profoundly irresponsible and I sincerely hope that the Government will at least use one of the powers that they have given the Secretary of State in this Bill and, by order, amend the date on which this scheme can be introduced. I sincerely hope that they will listen to the good advice of the Select Committee and defer what otherwise promises to be an administrative fiasco that will cause immense hardship.